In the financial services industry, an acceptance of demographics as the total basis of marketing strategy means an acceptance of the fact that affluent individuals each earning the same income and living in similar homes in the same area have the same financial needs. The individuals may be equal in all aspects, may even be living next door, but their financial planning needs are very different. In this context, demographics alone no longer suffice as the basis of segmentation of individual investors. It is by using lifestyles or psychographics along with demographics that synergism between investors can be generated. In fact, an investor-driven marketing strategy necessitates an understanding of the demographic, socioeconomic and lifestyle characteristics of the investors. The present study is an attempt to bring out lifestyle characteristics of the respondents and their influence on investment preferences. The study concludes that investors' lifestyle predominantly decides the risk taking capacity of investors.

Many of today's customer-data segmentation tools shed light on who the customer is (demographics), where they live (geographics) and how they interact with a company (behavioral and transactional data). The most sophisticated tools tell us why customers do what they do (psychographics). This is powerful stuff when considering the implications and applications of such knowledge. By understanding attitude, one will be able to better predict and shape behavior. "Brains can be scanned to predict peoples' financial decisions" and lend the psychographics' study for investor's decision more relevance, reality and practicality (The Hindustan Times, February 28, 2003).

Studies dealing with lifestyle characteristics of individual investors are very few. Langer (1975) finds that self-reported risk tolerance does the best job of explaining differences in both portfolio diversification and portfolio turnover across individual investors. From the vantage point of traditional finance theory, the positive correlation between risk tolerance and diversification is surprising, as both risk-tolerant and risk-averse investors diversify idiosyncratic risk. Investors who report being risk-tolerant are also more prone to believing that risk can be controlled, which suggests that self assessed risk tolerance also serves as a proxy for an `illusion of control', that is, overconfidence about one's ability to affect chance outcomes.

Behavioral Finance Journal, Financial Services Industry, Marketing Strategy, Psychographics, Customer-data Segmentation Tools, Portfolio Diversification, Investment Management, Portfolio Management, European Finance Association, Financial Planning, Investment Decisions, Initial Public Offerings, IPOs, Security Market, Psychological Characteristics.